Y&A Framework: Gas Station

We have worked on dozens of businesses and want to present our thoughts, to help you better navigate your business adventures

GETTING STARTED

1

Purchase vs Development?

2

Business Plan

3

License & Permit

RUNNING YOUR BUSINESS

4

Business Incorporation

5

Bookkeeping: QuickBooks

6

Accounting Calculator

7

Corporate Taxes

TREND & STRATEGIES

8

TREND & STRATEGIES

Why you should start a gas station business

Predictable revenue source

It is a profitable business with good profit margin (volume based).

Up-Sell Merchandise

GETTING STARTED

Purchase or Re-Development?

Make a choice to either buy an existing gas station or build one from the ground up. Your decision should be based onseveral things.

Location should be considered. Is there a gas station for sale in a high-traffic area at a price you can handle? Perhaps you have the perfect location in mind but it is currently a vacant lot. Cash Flows: Buying an existing property, gives more assurance about consistent cash flows (helps with financing)

License and Permits: Here are the permits you need to look into in the Gas Station Business

Business license is to ensure that the financial health of the young company is in good standing. Vendors, contractors and most importantly the state and local governments need to know that your business is legitimate. Additionally, if you avoid getting a business license there could be a fine from any of the forms of government that you may operate your business in.

Gas station requires several licenses and permits, in order to sell petroleum; you need register to Federal Identification Registry for Storage Tank Systems (FIRSTS) and get a permit from Technical Standards and Safety Authority (TSSA). Selling tobacco and alcohol requires special permit like registration from Alcohol and Gaming Commission of Ontario (AGCO).

Below are some of the permits you need to settle before you operate

Tobacco ($277.00 annually)

Lunch Counter ($174.00 annually)

Commercial Building and Land Use Permit (Minimum $345.00 / one-time fee)

Gas Natural Marketer $1,000.00

Use the permits and licenses search to find out which ones may apply to your business activity. You may also want to check with your municipal government about requirements for new businesses. Additionally, your business may need to comply with other regulations or obligations that do not involve permits and licenses.

Your Business Plan should contain everything about your proposed business such as the cost of the project, financial projections, risk sensitivity analysis, possible problems that might be encountered and how to deal with them, your management strategy, your marketing plan, executive summary, your personal profile, etc. It is a vital requirement for you to get a commercial loan and get financed; a concrete business plan is the first step to your success.

Management Reports

It is important for you to identify the projected investment and sales of the business you are running. Here are reports you want to look at:

Projected Income Statement (5 years projection)

Projected Cash flow – this will tell you how much you need to cover the operating cost

The operational cost for the first 3 months (salaries of employees, monthly payables)

The start-up cost of Inventory

Projected Balance Sheet

Being ahead of the game is always a plus. Like what Sydney Bremer said “A man that is prepared has half won the battle”

SWAT Analysis – A Must have for Financing

STRENGTH

High Demand of Petroleum Products

Gas station generate substantial gross margins from the sales of food products in an onsite convenience store

Predictable streams of revenue from the ongoing sales of gasoline and small food items

WEAKNESS

Petroleum prices are highly volatile.

Expensive inventories of fuel, this can cause dramatic shifts in the profits of a business

Opportunities

The best way to boost the income of a gas station is to maintain an onsite convenience store that can sell food and beverage products. The gross margin is substantially far more than selling gasoline and diesel fuels

Installing electric car charging stations

Owners can also benefit by having onsite car repair services.

THREATS

The need for gasoline is expected to decline over the next 10 years because of electric cars that are being developed by many manufacturers.

Competition caused some operators to compete on price, hindering profitability.

Want to Start a Business without living in Canada?

If you’re a Canadian Citizen

Yes, starting a non-resident business in Canada is possible. All you need is a Canadian address (not a Post Office box, but a real Canadian address). If you personally have or establish a Canadian address and are a Canadian citizen or a landed immigrant, you can register your business as a sole proprietorship (or as any of the other permitted forms of business in Canada).

If you’re Not a Canadian Citizen

If you're not a Canadian citizen or landed immigrant, One of your options is to form a partnership with a Canadian living in Canada; then you can use his/her address for starting your business in Canada. Another approach is to start an incorporated business. You would still need a Canadian address to enjoy the tax benefits of having a Canadian Controlled Private Corporation.

The federal statute requires that 25 per cent of the directors be resident in Canada. In case there are fewer than four directors, then the CBCA (Canada Business Corporations Act) requires that one director be resident in Canada. Each province has different residency requirements and an investor wishing to incorporate in Canada should consider this issue.

Existing foreign corporations can register to operate in Canada by either

Opening a branch office - To do this the foreign corporation must make an application for registration as an Extra-Provincial or Foreign Corporation in each province where the business intends to operate.

Incorporating a Subsidiary - a subsidiary is a Canadian corporation whose shares are held by the foreign parent company. A subsidiary can be incorporated federally or provincially. Compared with a branch office, incorporating a subsidiary gives the parent company limited liability from the actions of the subsidiary.

RUNNING YOU BUSINESS

Let’s Make it Official, and get your Business Registered

Incorporating is essential to the success of any business. The process of incorporating entails the preparation of certain documents, including a document referred to as the "Articles of Incorporation," and filing the documents to the Government. It is necessary for every business to incorporate; the primary advantages follow:

Shield yourself from liability.

Gain Tax Advantages

Enhance the company’s image

It establishes perpetual existence

Take our Quiz and start incorporating your business, incorporating online will take you about ten minutes and will cost you a fraction of what it would cost if you used a lawyer. We will walk you through the process and enable you to effectively incorporate your business based on your business's specific needs.

Book-Keeping : Book-Keeping is all about keeping track of your Business

Bookkeeping allows a business owner to have a greater understanding of how much progress has been made. This can provide a greater understanding of the areas within the business which make a profit and where costs might be trimmed. This kind of financial analysis can help you to avoid problems in the future.

Our Favorite Quick books Feature: Vendor Center

As an entrepreneur, managing your loans and debts could be challenging. You would want to pay your bills on time to get rid of those finance charges and late fees. QuickBooks can solve your dilemma, you can easily manage your accounts payable on one screen, the Vendor Center allows you to view all outstanding bills. The information is centralized which reduces the risk of errors such as paying incorrect amounts.

Accounting: Is all about Analyzing your Business

Gas station businesses attract customers by selling gasoline. You don’t earn a lot on fuel sales. Instead, use low fuel prices to attract drivers and then sell other products that have higher markups. Most gasoline stations have many pre-made foods, snacks, beverages and convenience items available which present high margin opportunities.

Working with your team at Y&A we will dig deeper into your business, to see where we could improve your bottom line. This equation one of the most important accounting formulas you can use in your business. To see if your current product mix is doing the trick.

Your break-even point.

It is important to have an estimate on how much you need to earn. Statistics is a must!

Every business needs to file their corporate taxes, whether they were actively engaged in business or not.

Sometimes, there’s an advantage to being the little guy—Canadian owned and controlled small businesses may be eligible for the small business deduction, bringing the tax rate down to 10.5%. The business limit on receiving the small business deduction is $500,000, meaning that corporate income up to the amount of $500,000 is eligible for the small business deduction.

Penalties

Failure to file your T2 taxes on time will result in penalties. These penalties amount to 5% of the amount owing on your taxes, plus an extra 1% for each full month that your tax filing is late. The late penalty for filing may jump to 10% if the CRA sends a demand to file, when there has also been a failure to file in any of the three previous tax years.

TRENDS STRATEGIES

There is no way to predict the future of any industry, but statistics can show trends, and those trends are showing gas stations will begin to modernize as technology continues to advance. Last year in Canada the number of gas stations rose due to stronger profit margins. The expansion of new services will only help to increase those figures.

Electric Vehicles

Electric vehicle adoption in Canada grew significantly last year. There are now close to 50,000 plug-in vehicles in the country and sales grew 68% in 2017. The bulk of the increase can be attributed to a 120% increase in Ontario, which drove sales in the entire country.

Historically, Quebec has been driving EV sales in Canada despite not being the most populous province, but Ontario is now taken the lead for the first time after introducing some of the most generous EV incentives ever seen, including a direct rebate of $14,000 on some electric cars.

Car Connected Apps

Gas station apps soon may be able to sync with cars to alert you when your vehicle needs gas; enable you to book a car detailing; and even show you the foods available at your nearest fuel station location. The Shell app already offers many of these services; however, once this technology is completely integrated into vehicles, the apps will be almost maintenance free. You will no longer have to input your information – your car will do it for you.

Sustainable Food

The growing importance of food sales in gas stations and the increase in environmentally friendly driving options such as electric cars and more economical fuels.

There is a trend towards healthier options and increased product selection, as more health-conscious foods can be found in convenience stores than ever before. If food sales in gas stations continue to grow the natural next step is healthy options with recyclable packaging.

Energy Efficiency

Revenue from retail stations has provided some financial cushioning when commercial oil prices slump for oil and gas producers, and renewable energy sources will do the same in the future. Already Shell, Enbridge and TransCanada have begun to invest heavily in renewable energy sources, so it seems highly likely future gas retail facilities will be built using the latest energy efficient technologies

At China’s new smart gas stations, no cash, cards, or smartphone apps will be required

The news: Banma, a joint venture between Alibaba and Chinese automaker SAIC that makes internet-connected cars, is opening a smart gas station this year in Beijing.

How it works: When a Banma car enters the gas station, geo-fencing systems detect where it is and trigger an app on the car’s touch screen. That lets drivers select fuel, pay via Alipay, and order things from the convenience store. Humans fuel the car and bring the goods. Then the driver just … goes.